Today, I'm writing about something that is very common in the crypto community and is something that I always see for those who are new to cryptocurrencies which is nothing but 'Over Trading'. It is something that plagues those who just step into the cryptocurrency space and are eager to get involved without investing enough time and dedication of due diligence and research into crypto space.
Now, why is this such a big issue? Well, cryptocurrencies, as we all know, are blooming up like crazy. They have really come up out of nowhere over the past year and become this market where a lot of people are making a ton of money and also a general interesting industry, blockchain is going to be a big revolution. I think because of these factors people get very involved in it but I think it goes a little bit deeper than that.
I think there are really two factors that really have encouraged people is the fact that they see these double-digit gains on a variety of different coins and not to mention you have got between Bitcoin and plethora of other cryptocurrencies that are practically in circulation. So, because of this people get very caught up in the hype. They get caught up in the tons of coins and hot new ICOs that are proposed to be the next big thing and we just don't know which ones to pick. We keep jumping from one or two coins and this is a very serious issue at least to a lot of people losing money that they have worked hard for.
Now some of you must be thinking why I'm saying over-trading is a trap? Why is it something that's so bad? Well, it's extremely unlikely that you are going to make money over-trading. Majority of the people are losing money in cryptocurrencies from day trading since many of the crypto traders don't even have prior experience of day trading in stocks. You are already putting yourself in a very small percentage of people who are making profits daily in crypto trading.
It's always good to practice if you are going to start day trading or swing trading to see what your returns would be if you just left it in one cryptocurrency or a group of cryptocurrencies for the long run rather than trying to trade ten different cryptocurrencies a day and see how comparatively you would be doing if you just held long-term. I can guarantee even those few people who make money day trading would not make as much as those who are long-term investing.
Another point that I would like to make here is that really there's just a huge stress factor to it and overtrading, you can get completely overwhelmed trying to bounce back between ten different cryptocurrencies. People see the hype they chase it, they see the headlines they buy it I mean that's not how you should do things. You should be five steps ahead of the market, picking good players, buying things on dips not buying things into the hype.
One of the biggest issue with over-trading that I haven't mentioned yet is the fees. It is something that you will silently see rip apart your portfolio. Whether or not even if you make a gain or a loss it doesn't really matter and the majority of the time you will slowly start to see your account debt-ridden.
So, I want to leave it in a quick summary you can over trade it to every extent and you can play the gamblers game and throw money everywhere and have a ball but at the end of the day you are most likely going to lose money and I highly advocate that this is not the way to go. I'm not saying you can't day trade, I'm not saying you can't go out and swing trade and I know many of you out there doing things the right way and are making the profit. But the thing is in the majority of the cases new cryptocurrencies enthusiasts jump the gun and start day trading from the first day and end up incurring heavy losses.
I highly recommend doing your own research, try to find out the reason why a cryptocurrency is fundamentally undervalued and try to apply real solid technical analysis. Start learning the art of charting out things that make it a clear trade close.
I hope you guys found this post useful and informative. Please share your thoughts and experiences in day trading in the crypto space and the biggest lesson you learned the hard way.